ANZ National prepares rate hike

• Tweet

ANZ National Bank is raising the interest rate it charges on its FlexiPlus revolving credit accounts despite most economists expecting the Reserve Bank will hold off raising its official cash rate (OCR) until well into next year.

Thursday, October 20th 2011, 5:00AM 7 Comments

by Jenny Ruth

The bank will raise the interest rate from 5.65% to 5.86% from November 1 on both ANZ and National Bank-branded FlexiPlus accounts which are secured by mortgages. However, its standard floating rate remains unchanged at 5.74%.

A letter advising FlexiPlus customers of the rate rise gave no reason for the increase.

"These types of home loan offer significant flexibility for customers in comparison to our other home loan products, as they act as a revolving credit facility and fully transactional account secured by a mortgage," an ANZ spokesperson says.

"Interest rates for these products are influenced by a number of factors including competitive positioning, the cost of funding, and the cost of the additional customer functionality with the Flexi product. We regularly review our interest rates taking all of these factors into account."

Which doesn't really answer the question.

David Tripe, head of banking studies at Massey University, says it "makes no sense at all" that the interest charged on such revolving credit accounts to be lower than a bank's standard rates.

"I have long argued that those products are far too cheap," Tripe says.

When such accounts were first introduced about 1990 they used to be priced at about a 100 basis point premium to banks' floating rates, he says.

"Pricing went completely haywire on that class of product seven or eight years ago." Tripe suggests this was the result of marketers within banks taking over "rather than anybody with any rational approach to credit risk and pricing."

Even after the rise, "an 11 basis point premium is hardly a big deal."

Comments from our readers

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Good Returns go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.